This guide explains general concepts for educational purposes. It is not financial, tax or legal advice, or a recommendation to buy, sell, hold or change a financial product or strategy. It does not take into account your objectives, financial situation or needs. Rules, caps, thresholds and product terms can change. Check the current official information and obtain advice appropriate to your circumstances before making a financial decision.
Defensive assets
Cash can provide liquidity and stability but may lose purchasing power after inflation. Fixed-interest investments can provide income and diversification, although their values can change as interest rates and credit conditions move.
Growth assets
Shares and property generally offer higher long-term growth potential but can experience significant falls and extended recovery periods. The income they produce can also vary.
Asset allocation connects risk and goals
The appropriate mix depends on the purpose of the money, investment timeframe, withdrawal needs and capacity for loss. Asset allocation describes the overall mix; product selection identifies the specific holdings used within it.
What drives the main investment categories
Cash commonly provides ready access and interest, with inflation affecting its purchasing power. Fixed-interest investments involve lending to an issuer; their values can move as interest rates and assessments of the issuer change. The term defensive describes a general portfolio role, not an absence of risk.
Shares represent ownership in companies and can provide dividends and capital growth or loss. Property can provide rental income and changes in value, whether held directly or through a listed or unlisted structure. The way an asset is held affects access, administration and concentration.
The portfolio is more than its labels
International assets introduce exposure to other economies and currencies. Currency movements can increase or reduce the Australian-dollar return, depending on whether the exposure is hedged. Listed and unlisted investments can also have different valuation and withdrawal arrangements.
Asset allocation brings these characteristics together in proportions intended to serve the portfolio's objective. The expected need for income, accessible capital and longer-term growth helps explain the role of each part. No fixed mix suits every household or guarantees a particular retirement outcome.